Texas Mold Insurance
Changes in homeowners insurance will ensure one thing --confusion
Novak, Austin American-Statesman Staff, January 26, 2002
For consumers, the chore of shopping for homeowners insurance
is going to get more complicated.
changes in the most common Texas homeowners policy, prompted by soaring claims for mold
damage, consumers likely will have to shop around more for the best price and coverage.
And they're likely to pay more for less coverage. Although insurance industry officials
say the changes will foster competition and increase options for homeowners, consumer
wants to be a good consumer and shop around, it's going to be almost impossible to
compare apples and apples," said Dan Lambe, executive director of Texas Watch, a consumer
research and advocacy group. "Everybody's going to have a different policy, a little
spokesman Justin Schmitt agreed that consumers are going to have to become savvier. "But
that's not necessarily a bad thing because they'll have options. Agents can help them
One of the
first challenges is understanding the different types of policies offered and how they
insurance companies are discontinuing the most popular policy, the HO-B. Until now, 96
percent of Texas homeowners have bought a comprehensive HO-B policy, which covers most
kinds of calamities, from lightning and hail to theft and explosions. It also covered
water and mold-related damage, including expensive testing and decontamination
But as the
number and cost of mold damage claims soared last year, some insurers began to restrict
or end sales of new HO-B policies and raise premiums steeply on renewals.
offered only the cheaper and less comprehensive HO-A policy, which covers water and mold
damage only when caused by wind or hail.
companies said soaring costs gave them no alternative. Farmers Insurance Exchange, the
state's second-largest home insurer, said it expected to lose $300 million last year on
claims for water and mold damage claims.
also complained that Texas required them to offer more extensive water-damage coverage
than any other state. The state mandates the types of coverage, but amounts are up to
November, Insurance Commissioner José Montemayor, seeking to avoid a crisis in insurance
affordability and availability, approved changes in coverage mandates and opened the door
to companies offering variations on standard policies.
policies cover only the immediate damage caused by a sudden or accidental water leak or
homeowners must report such leaks to their insurance company within 30 days after they
discover them, or should have discovered them. Homeowners who are not vigilant about
maintenance may have their claims denied.
new rules, homeowners can buy additional mold damage coverage in varying amounts, up to
the coverage limit of their policies.
some insurance companies are introducing, with Insurance Department approval, beefed-up
versions of their bare-bones HO-A policies at additional cost.
enhanced HO-A policy, for example, includes limited coverage for water damage not covered
under its basic HO-A policy.
Corp. will offer an expanded HO-A Plus policy that caps coverage for mold removal at
$5,000 to new customers, effective Monday. Starting in March, Allstate will offer the
Plus policy to homeowners who renew. It will no longer offer its HO-B policy.
by customer, but Allstate anticipates its expanded HO-A policy will cost an average of 20
percent less than its existing HO-B policy and about 16 percent more than its basic HO-A.
State Farm Insurance Co., the largest insurer, plans to seek approval for three policy
variations next month.
number of options complicates the task of shopping for insurance.
starters, Montemayor cautions people not to cancel their current policies until they have
another one in hand. They also should be aware that insurance companies may cancel newly
issued policies in the first 90 days for virtually any reason, except illegal
discrimination. If a consumer cancels a policy to buy another one, the previous insurer
must refund the unused portion of the premium.
homeowner doesn't want any gap in coverage, and with insurers looking carefully at a
homeowner's past claims, some companies are reluctant to add new policyholders who have
had any water problems," Montemayor said.
the new limits in HO-B policies, "B is still what you should be looking for if you can
afford it," said Rod Bordelon of the state Office of Public Insurance Counsel. The public
counsel, an arm of the Insurance Department, represents consumers interests.
that, consumers will have to read the fine print to discern the differences in policies.
old system, you knew what you were getting," said Lambe of Texas Watch. "Now, with the
endorsements, the opt-outs, the opt-ins, you can't just go on price anymore," he said.
"And unfortunately, the lowest-priced coverage, more often than not, is going to be the
coverage that has the most holes in it, leaving homeowners more vulnerable."
down with your agent periodically is a good idea anyway -- especially now, said Rick
Gentry, executive director of the Insurance Council of Texas, a trade group.
information is available to help homeowners sort out the changes through their agents,
the Insurance Department and other sources.
are smart," Gentry said. "They know how to shop and evaluate. Why do you think they drive
across town and go to Sam's Club? Because they know they can get a bargain."
related to homeowners insurance include:
general insurance questions, consumers may call the department's consumer line at
463-6515 in Austin or (800) 252-3439.
is available from the Office of Public Insurance Counsel, 322-4138.
To file an
By e-mail: ConsumerProtection@tdi.state.tx.us
By fax: 475-1771
By mail: Texas Department of Insurance
Consumer Protection (111-1A) P.O. Box 149091 Austin, Texas 78714-9091
Shopping for a homeowners policy
vary widely. Call several companies to get quotes. The Department of Insurance
publishes a rate guide that can help. Call (800) 599-SHOP (7467).
important to buy from a licensed company. Licensed companies belong to the Texas
Property and Casualty Guaranty Association. The association pays claims up to $300,000
if your insurer is unable to pay. If your company isn't licensed, your claim could go